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Airlines get $42M in jet fuel tax breaks from New Jersey, analysis finds

UnitedJetDavidGardAug2012.JPG

A state policy that only taxes airlines on fuel used during taxiing and takeoff amounted to a $42 million tax break for the industry in 2013, according to an analysis released today. A United Airlines jet is seen above Newark Liberty International Airport in this file photo.
(DAvid Gard/The Star-Ledger)

"Imagine only being taxed for the gas you use pulling out of your driveway."

Commercial airlines get $42 million a year in tax breaks from the State of New Jersey in 2013 under a policy that only taxes jet fuel they consume while taxiing and during takeoff, according to an analysis released today.

The analysis, conducted by the UNITE-HERE union, concluded that New Jersey is the eighth friendliest state to the airline industry, in terms of the dollar value of the fuel tax break.

The analysis is published online with a new website set up by the union at www.12billion.org. The union, whose represents thousands of airport workers, said it was the first look at the financial impact of fuel tax policy. National, the analysis found that state fuel tax breaks were worth more than $1 billion to airlines last year.

New Jersey taxes jet fuel at a relatively low rate of 4 cents per gallon, which private aircraft owners, charter services, banner towers and other members of the general aviation community pay at the pump for every gallon of fuel they purchase, said Adam Yalowitz, a spokesman for the union.

But commercial airlines in New Jersey — based mainly at Newark Liberty International Airport — get a break on jet fuel taxes through a policy that only taxes fuel consumed while taxiing and taking off. Some states do not tax jet fuel at all.

"Imagine only being taxed for the gas you use pulling out of your driveway," said Yalowitz, a spokesman for union. (Like the jet fuel tax, New Jersey's gasoline tax is also relatively low, at 14.5 cents a gallon, the cheapest in the nation after Alaska.)

The taxiing/takeoff tax is based not on actual consumption during each taxi run or takeoff, but rather on assigned fuel consumption values depending on the type of aircraft.

Yalowitz said giving airlines a tax break on fuel places an additional burden on the general aviation community and taxpayers in general to pay for airport-related improvements. Commercial airlines account for about 80 percent of all jet fuel consumption in the United States, Yalowitz said.

The tax benefit that the airlines receive that general aviators do not, Yalowitz said, is the absence of a tax on fuel carriers consume in flight. The estimated $42 million figure for New Jersey is based on mileage and other data from the federal Bureau of Transportation Statistics, he added.

Christopher Santarelli, a spokesman for the state Treasury Department, which includes the Division of Taxation, issued a statement disputing UNITE-HERE's premise that the taxi/takeoff fuel policy amounted to a "tax break."

"It’s important to first object to the premise of your question that anything a business does that is not being currently taxed is in turn a tax break," the statement read. "It is correct in that aviation fuel used by common carriers are taxed on the 'burn' which is the fuel used in taxi and takeoff on flights originating in New Jersey and landing outside of New Jersey. However on flights of common carriers that originate in New Jersey and also land in New Jersey, carriers are taxed on the entire amount of fuel consumed. The rationale for taxing only the “burn” is that is deemed to be the fuel used or consumed in New Jersey."

Airlines for America, the main industry lobbying group, issued a statement saying the industry accounts for 11 million jobs and $1.5 trillion in economic activity nationwide, and that New Jersey's and other states' fuel tax policies help keep carriers healthy, airline workers employed, and airfares down.

"Today, our customers pay more than $60 in taxes on a typical $300 round-trip ticket," the statement read. "No one wins when the industry, our customers and our employees are forced to shoulder higher taxes."